Why do conservatives want to bail out Obamacare?

January 23, 2014|Ramesh Ponnuru

In my Bloomberg View column this week, I argued that Republicans should work to pass a law to prevent the abuse of Obamacare's "risk corridors." Designed properly, risk corridors can be a useful way to spread risk among the insurers who participate in an exchange: The ones who have relatively healthy customers, and thus profits, can subsidize the ones with relatively sick customers, and losses. If almost all the participants are losing money, though, the exchange as a whole isn't working, and taxpayers generally shouldn't have to cover the insurers' losses.

My solution: Congress should pass a law that would block the loss-making insurers from getting any risk-corridor payments beyond those raised from the profit-making insurers. I argued further that in this case, stopping a bad policy would make for good politics: Republicans would be fighting against a bailout of the insurers.

Even among people who share my views that Obamacare is structurally flawed and that we should go in a very different direction on health policy, however, there is disagreement about whether it makes sense to cap the risk corridors.

Start with the Wall Street Journal. It has editorialized that capping the subsidies to insurers would raise premiums for exchange policies and therefore also raise the cost of taxpayer subsidies for the people buying them: "The 'insurer bailout' is a good political line but the problem is the law itself." Maybe the way to think about this issue is by asking a hypothetical question: If Obamacare as written did not allow taxpayer subsidies to cover participating insurers' losses, would the Journal now favor creating them in order to keep premiums lower? Or would it regard such subsidies as a bailout designed to prop up a bad law and resist it accordingly? I think we know the answer to that question.

If conservatives wanted to make the premiums on the exchanges as low as possible, they would be for toughening the individual mandate to get more healthy people to join the pool. They're against that idea, because they don't think shoring up Obamacare is worth the conscription of more social resources. They should follow that logic in this case, too. The Journal is right that "the problem is the law itself." But stopping taxpayer subsidies to insurers is both right on its own merits and part of the struggle against the overall law.

Perhaps, though, the Journal is elliptically alluding to a political worry: That if the insurers don't get their subsidies, the Obama administration will blame Republicans for the resulting problems of Obamacare. If so, it's a mistaken fear. The anti-bailout law couldn't pass without a lot of Democratic support. And even in its absence, supporters of Obamacare will blame its problems on its opponents. They have been trying to do it for months, without much success.

In Forbes, Yevgeniy Feyman argues that conservative health-care reforms require the use of risk corridors too, and Republicans should not try to discredit the idea. He's ignoring the distinction between insurer cross-subsidies and taxpayer exposure for insurers' losses. There's no reason conservative health reforms have to include the latter (and for that matter, even cross-subsidies would be needed only in Medicare, where taxpayer liabilities are already huge).

David Weigel, in Slate, writes that Republicans no longer have the leverage to stop the subsidies. An omnibus funding bill has passed Congress, so a government shutdown over the issue can't be forced. But who said anything about a shutdown? (And why would we assume that a shutdown gives Republicans leverage anyway? Didn't we just see that's an erroneous assumption a few months ago?) The House should pass the bill. If Harry Reid won't let it come to a vote, Republican Senate candidates will have a new campaign issue neatly gift-wrapped.

Weirdly, the first sentence of Weigel's post says that the campaign against insurer bailouts "has gained traction" while the last sentence says it has "failed to gain traction." The House has failed to act on the idea, Weigel says, even though I'm backing it. It's true that the idea has not gotten much further since my column appeared. But that was only on Monday. Give me a little more time!

(Ramesh Ponnuru is a Bloomberg View columnist, a visiting fellow at the American Enterprise Institute and a senior editor at National Review.)